Is High-Low accurate?
It is a simple estimate. It only uses two data points and ignores the rest (outliers can skew results). Regression analysis is more accurate but complex.
Calculator
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Analysis
Interpretation of the current calculator output
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How to Use
Step-by-step instructions
- 1Enter historical data points for Activity Level (units/hours) and Total Cost
- 2Need at least two data points (High and Low)
- 3Enter a target activity level to predict future costs
- 4Review the estimated Fixed Cost and Variable Cost per Unit
High-Low Formula
Uses the highest and lowest activity levels to estimate the slope (variable cost) and intercept (fixed cost) of the cost function.
Variable Rate = (High Cost - Low Cost) ÷ (High Activity - Low Activity)
Fixed Cost = Total Cost - (Variable Rate × Activity)Variables:
High/Low CostTotal cost at highest/lowest activity levelHigh/Low ActivityHighest/lowest volume of production or salesExample
Utility Costs
Inputs:
Low (Jan):1,000 units, $5,000
High (Jun):3,000 units, $11,000
Steps:
- 1.Variable Rate = ($11,000 - $5,000) ÷ (3,000 - 1,000) = $6,000 ÷ 2,000 = $3/unit
- 2.Fixed Cost = $11,000 - ($3 × 3,000) = $11,000 - $9,000 = $2,000
- 3.Cost Equation: Total Cost = $2,000 + ($3 × Units)
Result:
Fixed: $2,000, Variable: $3/unit
Frequently Asked Questions
When should I use this?
For quick estimates of cost behavior when you have limited data or need a rough budget approximation.
What are mixed costs?
Costs that have both fixed and variable components (e.g., a utility bill with a base charge plus usage fees).